Women Face a Challenging Path to Retirement

Silviya Simeonova by on Jun 01, 2017

Findings from Corporate Insight’s 2016 DC Plan Participant Survey indicate that most 401(k) plan participants are optimistic about their retirement outcomes. As we discussed in April, however, this high degree of confidence is largely unfounded considering that many participants are not saving enough and are ill-informed about retirement planning. Women in particular are especially vulnerable to financial troubles in retirement. Our study found that they have less in 401(k) savings than their male peers and have a bleaker retirement outlook, findings consistent with various studies on the subject, including the Financial Finesse 2016 Gender Gap study.

Our 2016 survey of retirement plan participants discovered that less than half of women (48%) contribute 10% or more to their defined contribution (DC) retirement plans, compared to 56% of men. The gap is especially pronounced for Baby Boomers and the Silent Generation, but the discrepancy exists across all generations. We see a similar trend in terms of reported DC plan savings. Seventy-four percent (74%) of Millennial and Gen X men had $50k or more saved in their DC plans, while 63% of women in the same generations had accrued that amount. The gap in retirement savings only grows with age. While 75% of Baby Boomer and Silent Generation men had saved at least $200k in their employer-sponsored plans, just 58% of their female counterparts had done so.

A series of factors contribute to women’s more modest savings in comparison to men, including career breaks due to family leave and a more conservative approach to investing. Women’s longer life expectancy also means that they need to save at a higher rate than their male counterparts. Given these challenges, it comes as no surprise that women are less confident about their retirement outcomes. Only 51% of female respondents in our survey indicated that they are confident or very confident that they will be able to afford the lifestyle they desire, while 64% of men said the same. This trend is consistent across age groups and is especially pronounced among Baby Boomers—with a 14 percent difference between men and women—many of whom are on the cusp of retirement.

Figure 1. Retirement confidence by gender

Percentage of respondents who are confident or very confident that they will be able to afford the retirement lifestyle they desire.

Confidence about retirement planning know-how is another dimension where women fall behind men. When asked if respondents know how much it will take to afford their desired retirement lifestyle, only 57% of women answered in the positive, compared to 71% of men. This gap in perceived understanding plagues all generations but the Silent Generation, and is once again especially stark among Baby Boomers.

Figure 2. Awareness of retirement needs by gender

These findings make women strong candidates for retirement planning education and professional financial advice. Women’s wider retirement readiness gap and related lower confidence can be overcome with targeted initiatives that consider such factors as the longer time women will likely spend in retirement, their tendency to put their careers on hold to raise a family and their comparatively conservative approach to investing. To offer a look into what firms are currently doing to attract and serve female clients, our Broker Monitor is releasing a report at the end of May that will examine the marketing content, initiatives and resources offered by 19 leading brokerage firms. The report can offer useful insights that can apply to the retirement space as well.

Corporate Insight’s Satisfying Today’s Retirement Plan Participant study covers these findings in more detail and examines other demographic challenges characteristic of the retirement industry. To secure your copy of this research report, please contact your Corporate Insight Relationship Manager or email Erin Bosetti at ebosetti@corporateinsight.com.